Glossary of Ocean Cargo Insurance Terms
ALL OTHER PERILS & MISFORTUNES:
Phrase in Cargo policy meaning perils of the same nature as those described specifically in the Perils clause.
Forcible taking of property but not sneak thievery.
Any partial loss or damage, due to insured perils.
Document signed by cargo owners by terms of which they agree to pay any General Average contribution properly due so that cargo may be released after a General Average loss has occurred.
Clauses in Cargo policy that determine the amount of Particular Average loss recovery.
AVERAGE IRRESPECTIVE OF PERCENTAGE:
Broadest "with average" clause. Losses by insured perils are paid regardless of percentage.
Fraudulent, criminal, or wrongful act by ship's captain or crew which causes loss or damage to the ship or cargo.
BILL OF LADING:
Contract of carriage between shipper and steamship company which is the ship owner's receipt for the goods and is the document of title to them.
CARGO WAR RISK POLICY:
A separate Cargo policy covering cargo while waterborne only (except at transshipping point, which may be on land or water). Insures against war risks.
CERTIFICATE OF INSURANCE OR SPECIAL POLICY:
A document prepared by the insured, the producer, or the insurance company to provide evidence of insurance to the buyer or bank for an export/import shipment. The certificate contains an abstract of the more important conditions in the policy.
Individual or company to whom cargo is shipped or consigned.
CTL (Constructive Total Loss):
An instance in which the cost of recovering and/or repairing damaged goods would, when recovered or repaired, exceed the insured value.
Form filled out by assured and sent to the insurance company when reporting individual shipments coming within the terms of an Open policy.
A vessel's going to some other point or taking some course other than that described in the Bill of Lading.
FPAAC (Free of Particular Average, American Conditions):
Average clause that limits recovery of partial losses under the Perils clause to those losses directly resulting from fire, stranding, sinking, or collision of the vessel.
FPAEC (Free of Particular Average, English Conditions):
Same as FPAAC except that partial losses under the Perils clause are fully recover-able if the vessel has been stranded, sunk, burned, been on fire, or in collision, without requiring that the damage actually be caused by one of these perils.
Loss resulting from a voluntary sacrifice of any part of the vessel or cargo, or an expenditure to safeguard the vessel and the rest of the cargo. When such a loss occurs, it is paid on a pro rata basis by the ship owner and all cargo owners.
(So-called for a famous legal decision involving a vessel of that name.) Covers losses resulting from a latent defect in the vessel's hull or machinery and losses resulting from errors in navigation or management of the vessel by the master or crew.
Document which shows the terms of sale; contains full description of goods, sale price, charges, discounts, etc.
Usually computed by adding the invoice cost, guaranteed freight, other costs, and insurance premium plus a percentage, commonly 10%. This usually represents landed value.
Voluntary dumping either of cargo or of ship's material or stores overboard, to protect other property from a common danger.
Wholesale market value at destination on final day of discharge.
MARINE EXTENSION CLAUSE:
Cargo policy clause that continues coverage on goods during deviation, delay, re-shipment, and transshipment, or any other variation in normal transit beyond the assured's control.
Specialist who determines the nature, extent and cause of loss and/or damage.
Sworn statement by captain describing any unusual happening during the voyage.
Partial loss sustained by goods insured.
PERILS OF THE SEA:
Hazards from natural forces in or about navigable waters (windstorm, rough weather, etc., but not fire, explosion, etc., which are perils on the sea).
TERMS OF SALE:
The following are brief descriptions of the more common Terms of Sale (fully defined in the "American Foreign Trade Definitions 1941"), setting forth the obligations of the seller and buyer.
(a) FOB (Free on Board)
The seller assumes charges and risk for the goods until they are loaded on board a named carrier at a named point, which may be an inland point or a port. The buyer is responsible for any loss or damage after loading on board the carrier. The buyer should specify FOB to control insurance without relying on the "other fellow".
(b) FAS (Free Alongside)
The seller assumes charges and risk until the goods are delivered alongside the vessel. Loss or damage from alongside the vessel is the responsibility of the buyer.
(c) C&F (Cost and Freight)
The seller assumes responsibility for charges and for loss or damage until the goods enter the carrier's custody or are loaded on board the vessel. The buyer is responsible for loss or damage at this point.
(d) CIF (Cost, Insurance, and Freight)
The seller's price includes cost of the goods, Marine insurance, and all transportation charges to the named destination point. Seller also provides War Risk insurance as obtainable in his or her market at the time of shipment, at buyer's expense (unless seller has agreed that buyer provides War Risk insurance). Seller should specify CIF to maintain maximum control of the shipment until the transaction has been completed.
TERMS OR METHODS OF PAYMENT:
If the insured is not paid for any reason, he/she must dispose of the goods and, therefore, still has an insurable interest. Following are the more common Terms or Methods of Payment:
(a) Collection by Draft
The seller bears the risk until he/she is paid. If for some reason, the buyer does not accept the shipment, the seller has the problem of disposing of the goods. By arranging the insurance, the seller can minimize the risk of loss.
(b) Open Account
When sales are made on an open account, the seller has financial risk similar to collecting by draft. Here again, the seller should attempt to arrange the insurance.
(c) Letter of Credit
In this procedure, the buyer establishes credit in U.S. money through his or her bank in favor of the seller. If the seller collects by this means, the letter of credit often stipulates that he/she arrange the insurance.
Provides basis for determining insured value of a shipment under the Open Cargo policy.
Insurance against loss or damage to property as a result of war risks.
WAREHOUSE TO WAREHOUSE:
An export/import policy clause that provides protection from the shipper's ware-house and during ordinary course of transit to the consignee's warehouse.
Please feel free to visit:
- Quote Information Sheet
- glossary of ocean cargo insurance terms.
- USFDA Import Alert information.
- Who are the people behind the scenes at WOCIS.
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